Working PapersSubramanian, Krishnamurthy., Tantri, Prasanna.,Sarkar, Arkodipta. "Agency Costs of Personal Risk Management by Bank CEOs : Evidence Using Exogenous CEO Turnovers"Centre for Analytical FinanceRead Abstract >Close >We examine the effect of CEO turnover on earnings management in banks. Since banking is intrinsically an opaque activity, we hypothesize that an incoming CEO of a bank is more likely to manage earnings than a counterpart in a non- financial firm. To identify the hypothesized effects, we exploit exogenous variation generated by age-based CEO retirement policies in Indian public sector firms. Com- pared to banks where there is no turnover, banks experiencing CEO turnover report 23% lower profit-to-sales and 25% lower return-on-assets in the transition quarter. This decrease occurs due to increased provisions, though such provisions do not associate with increased non-performing assets subsequently. Shorter CEO tenure exacerbates earnings management by the incoming CEO. The stock price declines by 1%, and lending is 2% lower than average, which highlight the real effects of earnings management by incoming CEOs. In contrast to banks, we observe no earnings management coinciding with CEO turnover for other public sector firms. As evidence of motivation, we show that earnings management increases likelihood of directorship positions in other firms within two years of retirement.

Working PapersMangipudi, Chandrasekhar., Subramanian, Krishnamurthy., Vasu, Rajkamal. "Valuation of Private, Innovative Targets: Evidence from Cisco’s Acquisitions"Centre for Leadership, Innovation, and ChangeRead Abstract >Close >We study how the value paid for private, innovative targets is affected by its knowledge-related intangible assets. We use unique data from Google Patents for the targets acquired by serial acquirer Cisco. We minimize bias in estimates of the value paid by comparing across deals undertaken within the same year by an acquirer that represents the “gold standard for M&A practices.” We find that acquirers pay for the target’s (i) intellectual property rights, (ii) expertise/technology especially that overlapping with the acquirer’s, and (iii) employees’ human capital. Ours is the first study to examine the value paid for knowledge-related intangible assets in mergers and acquisitions.

Working PapersMukherjee, Saptarshi., Subramanian, Krishnamurthy., Tantri, Prasanna. "Costs and Benefits of Debt Moratoria : Evidence from a Natural Experiment in India "Centre for Analytical FinanceRead Abstract >Close >Using loan account level data for more than 12,000 agricultural borrowers of a large public sector bank in India, we compare the effect of the loan waiver for distressed and non- distressed borrowers. First, we find significant improvements in loan repayment by distressed borrowers post the waiver. However, we observe no such improvement for non-distressed borrowers. Second, post the waiver, loans provided to distressed borrowers increase signif- icantly while the loans provided to non-distressed borrowers decrease significantly. Thus, while the credit worthiness of distressed borrowers that utilize the waiver increases while the credit worthiness of non-distressed borrowers that exploit the waiver decreases. Ours is the first study to provide empirical evidence on the costs and benefits of debt moratoria.